Indirect Tax Laws and Practice · Duty Drawback

Section 74 Customs Act: Drawback on Re-export of Duty-Paid Goods

Updated 11 October 2026 · Fact-checked

Section 74 lets you claim back 98% of the customs duty paid on imported goods when you re-export them. The goods must be easily identifiable, identified to the officer's satisfaction as the imported goods, and entered for export within two years from the date of payment of duty. Used goods get a notified lower rate.

Understand Section 74: Drawback on Re-export of Duty-Paid Goods

Customs duty is meant to tax goods that stay in India. If you import goods, pay duty, and then send them out again, the duty has served no purpose. Section 74 corrects this by repaying most of the duty as drawback.

The section applies to goods that are capable of being easily identified, were imported into India, and on which duty has been paid on importation. It covers three routes of export: goods entered for export where the proper officer permits clearance and loading under section 51; goods exported as baggage, where the owner's declaration under section 77 is treated as the entry for export; and goods exported by post, entered under clause (a) of section 84.

If the conditions are met, 98% of the duty is repaid. Two conditions apply. First, the goods are identified to the satisfaction of the Assistant Commissioner or Deputy Commissioner of Customs as the goods which were imported. Second, the goods are entered for export within two years from the date of payment of duty on import. The Board may extend the two years on sufficient cause being shown, for such further period as it thinks fit.

Note the reference point. The text of the section counts the two years from the date of payment of duty, not from the date of clearance for home consumption. Use the Act's words in your answer. Usually the two dates are close, but the Act speaks of payment.

Goods that were used after import are treated differently. The rate is fixed by the Central Government by notification, having regard to the duration of use, depreciation in value and other relevant circumstances. The Central Government can also make rules on identifying goods imported in different consignments but stored together in bulk, on goods deemed not easily identifiable, and on the manner and time for filing the claim.

Key rules to remember

Drawback on unused goods: Drawback = 98% × customs duty paid on importation; Applies only if both conditions in section 74(1) are met: identification and entry for export within two years.
Time limit: Entry for export ≤ 2 years from the date of payment of duty; The Board may extend for a further period on sufficient cause shown (proviso to section 74(1)).
Used goods: Rate = as notified by the Central Government (section 74(2)); Fixed having regard to duration of use, depreciation in value and other relevant circumstances. The Act gives no fixed percentage.
Date of entry for export: Date of entry for export = date used for rate of duty under section 16; Section 74(4)(a). For provisional assessment under section 18, the date of payment of provisional duty is the date of payment of duty (section 74(4)(b)).
Refund route for drawback: Drawback under sections 74 and 75 is paid to the applicant (section 27(2) first proviso, clause (e)); Section 27 does not make drawback go to the Fund; drawback is paid to the applicant.

How to solve Section 74: Drawback on Re-export of Duty-Paid Goods questions

For any question on re-export of imported goods, test the facts against each condition in section 74, then compute the drawback.

1Confirm the goods were imported into India and customs duty was actually paid on importation.
2Check the goods are capable of being easily identified. If they are not, drawback under section 74 fails unless the rules allow identification.
3Check the mode of export: entry for export with order under section 51, baggage with declaration under section 77, or post under section 84(a).
4Find the date of payment of duty, then the date of entry for export. Count the gap against two years. Look for any Board extension.
5Check identification. The officer must be satisfied the goods are those that were imported.
6Decide whether the goods were used. If unused, apply 98% of duty paid. If used, say the rate is notified by the Central Government, and use the given rate.
7Compute the amount, then state the conclusion in one clear line.
8 Mention that drawback is paid to the applicant and the claim follows the prescribed rules on manner and time.
9

Quickest way: Three-gate check

When to use it: Use it in MCQs and short case questions where you have little time.

Gate 1: duty paid and goods easily identifiable?
Gate 2: entered for export within two years of payment of duty (or Board extension)?
Gate 3: unused? If yes, take 98% of duty paid. If used, use the notified rate in the question.
If any gate fails, drawback under section 74 is not allowed.

Common mistakes in Section 74: Drawback on Re-export of Duty-Paid Goods

Giving 100% of duty as drawback on unused goods.
Students assume full refund because the goods leave India.
Fix: Remember the Act repays ninety-eight per cent of the duty.
Treating the two-year limit as fixed with no extension.
The proviso is overlooked.
Fix: State that the Board may extend the period on sufficient cause being shown.
Counting the two years from the date of entry or arrival of goods.
Students mix up dates.
Fix: Count from the date of payment of duty on importation, as the section says.
Applying 98% to used goods.
Sub-section (2) is skipped.
Fix: For used goods the rate is notified by the Central Government after considering use, depreciation and other circumstances.
Ignoring identification.
Students focus only on time and amount.
Fix: Always state that the goods must be easily identifiable and identified to the officer's satisfaction as those imported.
Claiming drawback on duty never paid.
Students forget that drawback is a repayment of duty paid.
Fix: Check that duty was paid on importation. No duty paid means nothing to repay.

Worked examples

Example 1

Sharma Traders imported a machine (unused, easily identifiable) and paid customs duty of ₹5,00,000 on 10 March 2025. On 20 January 2027 the machine was entered for export and the proper officer permitted clearance under section 51. Identification was established. Compute drawback.

Show the solution

Duty was paid and the goods are easily identifiable and identified.
Date of payment of duty: 10 March 2025. Two years end on 10 March 2027.
Entry for export on 20 January 2027 is within two years.
The goods are unused, so drawback is 98% of duty.
98% × ₹5,00,000 = ₹4,90,000.

Answer: Sharma Traders can claim drawback of ₹4,90,000.

Example 2

Kaveri Ltd imported equipment and paid duty of ₹2,00,000 on 5 June 2024. It entered the equipment for export on 15 September 2026, with no Board extension. Is drawback under section 74(1) allowed? What can Kaveri Ltd do?

Show the solution

Two years from 5 June 2024 ends on 5 June 2026.
Entry for export on 15 September 2026 is after this date.
The condition in section 74(1)(b) is not met.
The proviso allows the Board to extend the period on sufficient cause being shown, so Kaveri Ltd can apply for an extension.

Answer: Drawback of 98% is not allowed as the time limit is missed. It becomes allowable only if the Board extends the period on sufficient cause.

Exam tips

Quote the three conditions: duty paid, easily identifiable and identified, entry for export within two years.
Write 98% and the words of sub-section (2) for used goods; do not invent a percentage for used goods.
In date problems, write the two-year end date first, then compare.
In case scenarios, name the mode of export (section 51, 77 or 84(a)) briefly.
Keep the conclusion to one clear line, with the amount in rupees.

Practice questions from Duty Drawback

Section 74: Drawback on Re-export of Duty-Paid Goods in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CA FinalDrawback on Re-export of Duty-Paid Goods

Section 74: Drawback on Re-export of Duty-Paid Goods: frequently asked questions

How much drawback is allowed under section 74 on re-export?

For goods that qualify under section 74(1), ninety-eight per cent of the duty paid on importation is repaid as drawback. For used goods the rate is fixed by the Central Government by notification.

What is the time limit for drawback on re-export under section 74?

The goods must be entered for export within two years from the date of payment of duty on importation. The Board may extend this on sufficient cause being shown.

Do the goods have to be identified?

Yes. The goods must be capable of being easily identified and must be identified to the satisfaction of the Assistant Commissioner or Deputy Commissioner of Customs as the goods which were imported. Rules deal with bulk-stored consignments.

Does section 74 apply to goods carried as baggage or sent by post?

Yes. Section 74(1) covers goods entered for export, goods exported as baggage with a declaration under section 77, and goods entered for export by post under section 84(a).